In the current real estate market, more and more of our clients are renting their homes instead of selling them. They hope that they'll make more profit by waiting. In the meantime, they're collecting rental income on the property.
Many people don't know that a rented home is no longer eligible for a homeowners policy. To properly insure your rented dwelling, you need to buy either a Dwelling Fire policy or a commercial policy.
The Risks of Renting
Rental property has a slightly higher risk of property loss, for several reasons:
- Your tenants may not identify or report maintenance needs so that you can address them.
- Renters are unlikely to have the same degree of "pride of ownership" as you.
- Your renters may be unfamiliar with the systems and "quirks" of your home that are second nature to you. We've even seen losses where the tenant did not know how to shut off the water to stop an overflowing toilet!
Different Perils, Different Policy
As a homeowner, your policy covers your home and your belongings. When you rent out your home, your contents are typically limited to appliances you might leave behind for the tenants. Also, if your rented property is damaged, you could lose twice: the cost to repair the damage, and the rental income lost while your tenants can't live there.
Most important, renting your home increases your responsibility for injuries on the premises – anything from slips and falls to someone being hurt during a fire. This increases the importance of inspecting and maintaining your property.
Dwelling Fire and commercial policies can protect the building and rental income. Often, the coverage isn't quite as broad as your homeowners policy, but it still covers the catastrophic losses of fire, windstorm, collapse from ice or snow, etc.
Like homeowners policies, these policies do not cover flood or earthquake – although such coverage is available.
Considering Renting Your Home?
- Call an agent for an insurance quote.
- Consider higher deductibles and higher liability coverage than your current homeowners policy may have.
- Check on your property regularly; hire a property manager if you can't.
- Require your renters to buy tenants' insurance to protect their property and liability from their own negligence. Your policy will not provide coverage for either.
For answers to your personal insurance questions, contact Noyes Hall & Allen Insurance.